What are the Options for Buying a Home After Separation?

Working Out What You Can Borrow on a Single Income

Your borrowing capacity will look different now than it did when you applied for a loan together. Lenders assess your income, living expenses, and any child support or maintenance obligations individually. If you're receiving child support, most lenders will include between 70% and 100% of that amount toward your income, depending on the lender and how long the payments have been received. If you're paying child support, that amount is deducted from your available income before serviceability is calculated.

Consider someone earning $95,000 annually who receives $18,000 in child support and has modest living expenses. At current variable rates and with lenders applying the 3% buffer APRA requires, borrowing capacity might sit around $550,000 to $600,000, depending on the lender's treatment of the child support and their living expense benchmarks. Some lenders are more conservative with expense assumptions for single-parent households, while others assess your actual verified expenses. That difference can shift your borrowing capacity by $50,000 or more.

If your income alone doesn't give you the borrowing power you need, there are other structures worth exploring, including using a family member as a guarantor or applying with a partner if you've moved into a new relationship.

What Deposit Do You Actually Need?

You'll need a minimum deposit of 5% of the purchase price to access most standard lending, though some lenders require 10%. If you're purchasing with less than a 20% deposit, you'll be required to pay lenders mortgage insurance unless you qualify for an exemption or use a government guarantee scheme.

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit as low as 5% without paying LMI. Property price caps apply and vary by location. In NSW, the cap is $1,500,000 in capital cities and regional centres and $800,000 in other areas. In Victoria, it's $950,000 in capital cities and regional centres. If you meet the first home buyer criteria and haven't owned property before, or owned property only with your former partner and no longer hold an interest in that property, you may be eligible. Applications are made through participating lenders, not directly through Housing Australia.

If you're purchasing in Victoria and your deposit comes from a property settlement, you may also be able to access stamp duty relief. A full exemption applies on properties valued up to $600,000, with a concession available up to $750,000, provided you move in within 12 months and occupy the property as your principal place of residence for at least 12 months.

Choosing Between Variable, Fixed, or Split Loan Structures

A variable rate loan gives you flexibility to make extra repayments and access features like offset accounts, which can reduce the interest you pay over time. If you're expecting a lump sum from a property settlement or anticipate changes to your income, a variable rate structure lets you adjust repayments without penalty.

Fixed rates lock in your repayment amount for a set period, usually between one and five years. That certainty can be valuable when you're managing a budget on a single income and want to avoid any surprises. The downside is that making extra repayments is usually restricted, and if you need to sell or refinance during the fixed period, break costs may apply.

A split loan combines both structures. You might fix 50% of the loan for rate certainty and leave the other 50% variable for flexibility. This approach gives you some protection if rates rise while still allowing you to make extra repayments or use an offset account on the variable portion.

Using an Offset Account to Reduce Interest Without Locking Funds Away

An offset account is a transaction account linked to your loan. The balance in the offset account reduces the loan balance on which interest is calculated, without actually paying down the loan principal. If you have a $400,000 loan and $30,000 sitting in a linked offset, you're only charged interest on $370,000.

This structure works particularly well if you're holding funds temporarily, whether from a settlement, savings you want to keep accessible, or income that fluctuates. The offset reduces your interest cost in real time without locking the funds into the loan, so you can access them immediately if your circumstances change. Not all loan products offer offset accounts, and some charge a higher interest rate or annual fee for the feature, so you'll need to compare whether the interest saving outweighs any additional cost.

What Lenders Look for When You're Applying After Separation

Lenders will ask for evidence that your separation is formalised and that any property settlement has been completed or is in progress. If you're still listed on a joint mortgage with your former partner, most lenders will include that liability in your serviceability assessment, even if your ex-partner is making all the repayments. You'll need to demonstrate that the property is being sold, refinanced, or that you've been formally released from the mortgage before most lenders will exclude it from your application.

If there's a binding financial agreement or consent orders in place, provide a copy early in the application. That helps the lender understand your ongoing obligations and speeds up the assessment. If your settlement is still being negotiated, some lenders will issue conditional approval based on the expected outcome, but you won't reach unconditional approval or settlement until the property division is finalised.

Your employment history and income stability also carry more weight when you're applying individually. If you've recently changed jobs or reduced your hours, be prepared to explain the circumstances. Lenders prefer to see at least three months in your current role if you're a casual employee, or a signed contract if you're transitioning to a new position.

Structuring the Loan to Match Your Current Situation and Future Plans

If you're planning to upsize in a few years or expect your income to increase once children are older, an interest-only period might give you lower repayments now while you stabilise. You're not reducing the loan balance during that period, but you're keeping more cash available for other expenses or to build savings. Interest-only periods are typically available for up to five years, and you'll need to demonstrate that you can service the loan on a principal and interest basis once that period ends.

If your priority is to build equity and own the property outright sooner, a principal and interest loan with the option to make extra repayments will reduce your loan balance and the total interest paid over the life of the loan. Some borrowers in this situation choose a 25-year loan term instead of 30 years to force a higher repayment and finish the loan sooner, though that approach only works if your income comfortably supports the higher repayment.

If you're purchasing an investment property rather than an owner-occupied home, the lending criteria and loan structure will differ. You can read more about that approach in our article on buying your first investment property.

Getting Pre-Approval Before You Start Looking

Pre-approval gives you a clear borrowing limit and shows sellers and agents that you're a serious buyer. It's particularly useful in a market where properties are selling quickly or where you're competing with other buyers. The lender will assess your income, expenses, deposit, and credit history, and issue a conditional approval valid for three to six months, depending on the lender.

Pre-approval isn't a guarantee. The lender will still need to assess the specific property you're purchasing, and if your circumstances change between pre-approval and settlement, the lender may withdraw or adjust the offer. You can find more detail on the pre-approval process and what documents you'll need in our guide to getting loan pre-approval.

Call one of our team or book an appointment at a time that works for you. We'll walk through your situation, work out what you can borrow, and help you structure a loan that fits where you are now and where you're headed.

Frequently Asked Questions